PATTI'S NOTES
SDCERS BOARD MEETINGS
August 21, 2009

(These notes are from the Board meeting on Friday. Notes are by subject. They are my understanding of what happened.)
SDCERS Web Access - Board meetings, with subject access, are available for viewing at www.sdcers.org
TELEVISION- If you live in the City limits, Board meetings are on Channel 24 around 5 or 6pm, usually the third Friday of the month, and usually repeat on the following Sunday at 1pm
Official CDs of SDCERS' committees and Board meetings are available through the Board Secretary; visual recordings are available through City Channel 24. Motions and votes are in SDCERS monthly summaries of Board meetings.

Directions to on-line pension numbers:
Jay Goldstone has SDCERS' numbers on-line (pdf) at the City's bond investors web site. Go to City web site, on the upper left hand corner click on "Investor Information", at the bottom you must click on "read terms of use now". This takes you to the Investor page. Go down about 9 sentences/paragraphs, and click on the blue "OK" at the bottom. Click on "pension up-date".  Click on pension by month. It is approximately four pages long.

SDCERS BALANCE and Pension payments
July 31, 2009 unaudited total fund balance found at the bottom of the page entitled "Current Actual Asset Mix" was $3,766,884,339.

Sara Jimenez's "SDCERS Group Trust Financial Statements" dated August 13, 2009 reports audited numbers for:
June 30, 2009- Total assets were $3,416,032,984.
June 30, 2008- Total assets were $4,384,847,086.

The Executive Summary of Staff Reports says pension payments for July were $22.6 million.

MEMBERSHIP as it appears in the August report for July 31, 2009:
Retired including DROP was 6404.
Active was listed as 9469.
Deferred/Inactive was 2932.

SDCERS INVESTMENT RETURNS
Trustee Steve Meyer noted what a difference that a quarter makes.  If the previous three quarters were remarkably negative, the fourth quarter of Fiscal Year 2009 (ended June 30, 2009) was remarkably positive, he said.

SDCERS Chief Investment Officer Liza Crisafi reported the last quarter was up over 13%. (Real estate returns delayed one quarter routinely. So final investment returns for Fiscal Year ending June 30, 2009 are not included yet.) Nice to be back in the black this last quarter, said Liza.

Crisafi's August Status Report says,
"The realized gains for FY 2009 totaled -$312.5 million (negative).
The level of unrealized losses totaled -$297.5 million (negative).
These values are unaudited."

"SDCERS Y-T-D Status of Realized Gains" page shows a recovery trail from February's unrealized losses of minus -$907.6 million. By June, unrealized losses were reduced to minus-$297.5 million .

Liza's August 7, 2009 report on "FY 2009 Realized Rate of Return" shows FY 2009 YTD Total Realized Rate of Return (compounded) as a negative,
-6.87%.

Callan Associates' Investment Performance Report for Quarter Ended June 30, 2009. The spiral binding version, has an Executive Summary that does not appear in the handout at the Board meeting. On page 3 of that Executive Summary, under Total Fund Performance ( minus real estate), "...For fiscal year ended in June, the System was down 18.9%...." On page 6, The Summary and Conclusion of the Executive Summary says, "Two major equity market corrections in the last 10 years have caused the System to under perform its actuarial rate of return over this period. However, the twenty and one quarter-year total fund return is above the actuarial target."

BUSINESS AND GOVERNANCE COMMITTEE REPORTS

TRANSPARENCY:
Chair of the Business & Governance Committee, Vice President Trustee Ray Ellis reported increased transparency with more documents on SDCERS web site and the upcoming members meeting on September 22nd.

Member Services Director Cynthia Queen's report for August said:
"Additional news items were added to the web page related to recent actuarial discussions at the Board, to ensure that members have access to all information.  The section, entitled 'Information Regarding Board's Hearing of Actuarial Implication of FY 2009 Investment Results,' is featured under Latest News on the home page and leads to a full additional page, which includes an overview and the following documents:
· Letter from David Wescoe to Mayor Sanders and the City Council
· Statement regarding Board's hearing of actuarial implications of FY 2009 investment results
· Fiduciary counsel presentation
· Actuary's presentation
· Frye/DeMaio Memorandum
· Letter to Union-Tribune from former Board President Tom Hebrank

AWARDS:
Ellis noted SDCERS FY 2008 CAFR has received a "Certificate of Achievement Excellence in Financial Reporting" award from the Government Finance Officers Association (GFOA). It is the "highest form of recognition in government accounting and financial reporting". "Kudos to Sara Jimenez, Fanela Espiritu, Jamie Hamrick, Bob Wilson, and several others who worked so hard to achieve this award", wrote Chief Financial Officer Mark Hovey in his August 20th report.

ACTUAL FY 2009 BUDGET:
Ellis announced every category of SDCERS budget last year came in under budget, except for legal (up 119%). Savings, on capital expenditures, were more than $900,000. (The written report of the final budget noted $38,709,206, or only 82.4% of the original budget of $41,368,095.) Savings totaled about $4 million.

Ellis found it noteworthy that staff also answered questions and provided background training to seven new trustees last year without increasing the budget.

Ellis expressed the Board's appreciation of Wescoe and staff for their efforts to reduce costs last year. Ellis expected that next year expenses would likely be reduced again.

SDCERS DATA REVIEW PRESENTATION
"Enhancing the reliability and accuracy of member and beneficiary data"
Dave Arce's report, as Special Project Director, shows corrections of default settings on members records, errors in cost of living adjustments, incomplete data, system conversion errors, software post implementation errors, Plan Sponsor data errors, etc. Finally, this project is developing a stronger knowledge base for other key projects in the future. 

LEGAL UPDATE:
Elaine Reagan's August report indicated:

1) "SDCERS' Cross Complaint: Recovery of monies owed by City to SDCERS but not paid because of MPII"
is listed under Judge Barton, with "City's Cross-complaint: Validity of MPI and MPII and certain retirement benefits."
"SDCERS v. City of San Diego and City Attorney Michael Aguirre
SD Superior Court
Case No. GIC 841845
Consolidated with:
SDCERS v. City of San Diego
GIC 851286"

2) "August 21, 2009: City's demurrer to First Amended Petition/Complaint" on the "Action by SDMEA on behalf of former president Judy Italiano to enforce right to pension on now-discontinued "Presidential Leave" retirement contribution program." In "San Diego Municipal Employees Association; Judith Italiano v. City of San Diego; SDCERS
SD Superior Court
Case No.: 37-2008-00096145-CU-BC-CTL
Judge: Vargas

GUIDELINES FOR DECISIONS ON DISABILITY
Trustees must decide according to the Plan Sponsor's Plan Document and not the apparent reasonableness or fairness of arguments.